06:30 AM EDT, 09/06/2024 (MT Newswires) -- The Japanese parent of the 7-Eleven chain of convenience stores has rejected a bid from Canada's Alimentation Couche-Tard Inc. ( ANCTF ) , saying the proposal, which would have been the largest foreign takeover of a Japanese business in history, grossly undervalues the company, The Globe and Mail newspaper is reporting Friday.

The report noted Seven & i Holdings Co., Ltd. had been widely expected to resist the Canadian takeover even after changes to Japanese mergers and acquisitions guidelines in recent years have made doing so harder.

In a letter disclosed to investors Friday, Stephen Dacus, chair of a special committee tasked with considering the offer, said it was "not in the best interest of 7&i shareholders and other stakeholders."

"We are open to engaging in sincere discussions should you put forth a proposal that fully recognizes our standalone intrinsic value and addresses our concerns regarding certainty of closing in the current regulatory environment," Dacus wrote to Couche-Tard chairman Alain Bouchard. "However, we do not believe, for several critical reasons, that the proposal you have put forward provides a basis for us to engage in substantive discussions regarding a potential transaction."

Dacus said the special committee, formed of independent outside directors, found the proposal of US$14.86 per share to be "opportunistically timed." The offer "grossly undervalues our standalone path and the additional actionable avenues we see to realize and unlock shareholder value in the near- to medium-term," he added.

The Globe and Mail noted the US$14.86, or 2,129 yen, price is below the 2,400 yen a share most analysts had expected Couche-Tard to offer. Seven & i shares were trading at around 2,125 yen a share at lunchtime Friday, having dipped on the news of the takeover rejection.

Even should Couche-Tard counter with a higher offer, Dacus said the board felt any takeover would face "multiple and significant challenges" under U.S. competition law. More discussion would also be required on "the crucial role that 7&i plays in everyday life in Japan across food retail, banking and other services," he added.

The Globe and Mail noted a tie-up between Couche-Tard and Seven & i would almost certainly trigger a review by competition authorities in the United States, Japan and other countries. Analysts predict the Canadian company would be forced to sell more than 1,000 of the two chains' 20,000 U.S. outlets to win regulatory approval for a takeover.

On a call with analysts Thursday, Couche-Tard chief executive Alex Miller said the Quebec-based company was "confident" it could complete a takeover of 7-Eleven, which would create the fourth-biggest retailer in the world after Walmart, Amazon and Costco, with annual revenue topping US$150-billion and more than 100,000 stores, according to data from the U.S. National Retail Federation.

(Market Chatter news is derived from conversations with market professionals globally, and/or from other media sources. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)